Wednesday 4 March 2020 10:01 pm

Government at risk of another Carillion-style failure, warns report

The government is at risk of another Carillion-style collapse if it does not support the reforms proposed after the outsourcing giant’s collapse two years ago.

In a new report, the Institute for Government (IfG) has said that the government has “not consistently” followed the Cabinet Office’s new guidelines as to how large contracts are awarded and managed.

Read more: Serco grows revenue for first times since 2013 as outsourcer puts past behind it

According to the report, this means that “the government is still signing risky contracts which may well collapse”.

In order to prevent a Carillion-style situation occurring again, the IfG has called for the government to name a Cabinet Office minister to take responsibility for improving outsourcing.

The report also calls for the Cabinet Office to be given extra funding in the summer’s spending review to use to up its scrutiny on departmental procurement.

Many of the reforms in question were published in last year’s outsourcing playbook, a Cabinet Office led attempt to implement new practices and behaviours in the letting of large contracts.

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Industry was largely unified in its support of the measures, but the report finds that outside of Whitehall there has been little awareness of the reforms.

Local government and public bodies including the NHS have an annual procurement budget of over £100bn, but the Cabinet Office’s reforms don’t apply to them yet, a limit which the IfG says should be abolished.

Tom Sasse, IfG senior researcher and report author, said: “Carillion was a wake-up call, with its collapse showing where a careless approach to outsourcing can lead.

Read more: Government appoints advisers to oversee outsourcers amid fear of Carillion-style collapse

“The government must implement serious reform if it is to secure services that are reliable, high-quality and value for money – and avoid the prospect of contractors collapsing in future.”

When it entered administration Carillion was the UK’s second largest construction company, holding 450 government contracts, and put 45,000 jobs on the line..